A revaluation of Gulf currencies, most of which are pegged to the dollar, to combat inflation will not be on the agenda of a heads of state summit beginning in Doha today, finance ministers said.
Currency revaluation "isn't on the agenda", Kuwaiti Finance Minister Mustafa Al Shimali said, according to a Bloomberg report.
"It wasn't discussed in a preparatory meeting today either," said Qatari Finance Minister Yousef Hussain Kamal. The meeting of the GCC members comes amid anticipation of a change to the UAE's dollar peg.
On Thursday, media reports claimed this would happen yesterday and recent comments by the Central Bank Governor Sultan Nasser Al Suwaidi indicate that the UAE is considering abandoning or adjusting the dollar peg.
The UAE official news agency initially reported the peg would be discussed at the summit, although this statement was later withdrawn.
However, analysts believe that with the dollar, and therefore the dirham, falling to record lows against the euro last month, GCC must act.
Pressure has been mounting on the dirham to revalue, with importers complaining of higher prices and expatriate workers feeling the squeeze as their wages diminish relative to their home currency.
So far these calls have been unheeded, but with sustained US interest rate cuts adding to UAE inflationary pressures, the merits of being able to forge an independent monetary policy may prove decisive.
The dollar peg means UAE monetary policy is effectively set in Washington.
The GCC is officially set for monetary union in 2010, but few analysts believe is possi ble, especially since Kuwait switched from a dollar peg to a basket of currencies in May.
The UAE has said it would not consider such a move without consulting its fellow Gulf states and Saudi Arabia has been a vocal advocate of retaining a dollar peg despite rising inflation.
© Emirates Today 2007
